A Case Study Of Lenovo Group’s Executive Compensation Incentive

Lenovo Group was established in 1984,led by Liu Chuanzhi and 10 scientific and technological personnel from the Chinese Academy of Sciences.After a period of development and growth,it has become a global technology company with operations in180 markets worldwide,and has entered a period of rapid development.The company is constantly undergoing transformation and upgrading,developing mergers and acquisitions,major adjustments,and entering new business areas,and its scale and business projects are constantly expanding.Even once a leader in the technology industry,there has been a recent public surprise-a one-day trip to the Science and Technology Innovation Board,and its high-priced executive incident has been uncovered.Lenovo’s current executive compensation incentive system has not improved the company’s financial performance,which to some extent hinders the company’s development.In the current large market,many competitors have come from behind and replaced Lenovo as a leading enterprise.The reason why the performance of Lenovo Group has not improved under the high intensity of executive compensation incentives has become an urgent problem for enterprise managers to solve.Based on principal-agent theory,incentive theory,etc.,this study analyzes the failure of executive compensation incentives in Lenovo Group as a case study.Firstly,a review was conducted on the objects,methods,stakeholders,supervision,and effectiveness of compensation incentives.Secondly,the research object and scope were clarified by defining executive compensation.At the same time,relevant theoretical analysis was also conducted to define the criteria for judging the failure of compensation incentives,that is,when executive compensation incentives are effective,they can not only improve business management performance,but also help enterprises achieve the goal of maximizing value,providing theoretical basis and guidance for subsequent parts.Analyze Lenovo’s company nature,business content,salary incentive status,and financial performance status again.In the process of analysis,a comparative analysis method was used to compare the financial performance of Lenovo and Huawei.The conclusion was drawn that Lenovo’s executives had high salaries,insufficient research and development investment,and their financial performance was significantly lagging behind the general improvement of industry performance.The changes in Lenovo’s financial indicators from 2015 to 2020 were analyzed,and the conclusion was drawn that the company’s compensation incentives were ineffective,And identify the problems in its salary incentive system.The main problems are the lack of fairness in salary system design and the large salary gap.Salary incentives only target specific executives and ignore other stakeholders,while the correlation between the salary income and contributions received by specific executives is low.The main reasons behind the analysis of the problems are the outdated management concept of the salary system,incomplete salary contracts,and unreasonable incentive mechanisms.In addition,the fundamental reason lies in the problem of corporate governance.Here,through the reference of relevant incentive theories and the analysis of practical problems,methods to prevent the failure of executive compensation incentives are proposed,mainly including drawing on scientific and reasonable salary distribution systems,special audits of executive compensation,and strengthening the construction of executive ethics.Through the study of the ineffective compensation incentives for Lenovo Group executives,it is concluded that the compensation incentive system should not only consider the needs of a small group of people in the enterprise,but also consider other stakeholders more.At the same time,as the basis for designing salary incentive systems,the setting of corporate strategic goals should be reasonable and in line with market changes.Pay attention to the development of all stakeholders in the enterprise and combine it with the development of the enterprise.Through effective salary incentives,motivate employees to work hard to improve their work efficiency,attract and retain excellent employees,improve the competitiveness of the enterprise in the large market,and thus promote the further development of the enterprise.